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Chapter 5: Q3DQ (page 594)

How does the stockholder, in general, feel about the relevance of dividends?

Short Answer

Expert verified

The dividend is relevant to the shareholders as it serves as an incentive for them when the company shares its profits with them.

Step by step solution

01

Step 1:Meaning of dividend

The income distributed by the company to its shareholders from its residual income is called the dividend. The dividend distributed by the company is dependent on the management’s decision.

02

Relevance of dividends to stockholders

The dividend is relevant to the stockholders as the company shares its profits with them.The dividend is beneficial to the shareholders as they get an incentive for their investment.

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Most popular questions from this chapter

The Pioneer Petroleum Corporation has a bond outstanding with an \(85 annual interest payment, a market price of \)800, and a maturity date in five years. Find the following:

a. The coupon rate.

b. The current rate.

c. The yield to maturity

The Presley Corporation is about to go public. It currently has after-tax earnings of \(7,200,000, and 2,100,000 shares are owned by the present stockholders (the Presley family). The new public issue will represent 800,000 new shares. The new shares will be priced to the public at \)25 per share, with a 5 percent spread on the offering price. There will also be $260,000 in out-of-pocket costs to the corporation.

c. Compute the earnings per share immediately after the stock issue.

Assume Sybase Software is thinking about three different size offerings for issuance of additional shares.

Size of Offer Public Price Net to Corporation

a. 1.1 million................. \(30 \)27.50

b. 7.0 million…………… \(30 \)28.44

c. 28.0 million………… \(30 \)29.15

What is the percentage underwriting spread for each size offer?

How might a leveraged buyout eventually lead to high returns for a company?

What are electronic communication networks (ECNs)? Generally speaking, are they currently part of the operations of the New York Stock Exchange and the NASDAQ Stock Market?
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